Never before has private equity offered such a variety of funds. Each week heralds news of the latest fund offering, but competition for capital commitments and astute investors have increased the average timeframe for fundraising. Some are questioning the industryâs ability to keep up the pace.

According to London-based buyout research boutique Private Equity Intelligence, the number of funds in the market since the start of the year has increased by 13%, from 1,304 funds seeking $705bn (€447.2bn) to 1,478 funds looking for aggregate capital of $844bn.

As a result of increased competition, the time spent fundraising has increased considerably and the “actual number of funds achieving a final close has not been as strong”, said Preqin.

According to the figures, the average number of months spent fundraising is 14.2 for funds closed so far this year. This compares with 9.5 months for funds closed in 2004, a jump of 50%.

Tim Friedman, spokesman for Preqin, said: “With funds taking longer than ever to raise and with more funds every day, the fundraising market is in serious danger of becoming saturated.”

Friedman said if the number of funds on the market did not stabilise soon, it was likely fund managers would be unable to reach their fundraising targets, as a result of potential investors reaching their maximum allocations.

Lord Charles Cecil, co-founder of London-based placement agent Helix Associates, said: “The real delay is coming from the investors yet to decide on their commitment. A fund manager may be a new name for a limited partner and they are not in a rush to make a decision.

“Investors are taking greater care in choosing funds compared with a couple of years ago when fundraising was rapid and investors could lose a slot in a fund if they did not act quickly. Additionally, late last year, demand was way in excess of the ultimate target but most of that excess has disappeared, even for some of the most popular funds.”

The increased amount of time it takes to raise funds can be put down to many factors, including the size of funds, competition among fund types and investor scrutiny.

Antoine Dréan, founder and managing partner at French-based placement agent Triago, said: “The difficulty in this business is making the right choice – it is not a science, it is an art – past performance is no guarantee for future results. Investors seem to be allocating more money to fewer funds and the consequence is they are looking much deeper into the funds they are investing in. Limited partners realised a few quarters ago that investing in 10 similar teams usually resulted in creating your own inflation – it does not make a lot of sense to invest in competing teams.”

The type of fund also has an effect upon the success of a fund close. Mid Europa Partners, a buyout fund specialising in central and eastern Europe, closed the largest fund for the region on €1.5bn ($2.4bn) in October. The group’s third fund was launched in May 2007, sustained the summer credit crunch and was oversubscribed.

Thierry Baudon, founding partner at Mid Europa, said: “Even before the credit crunch, limited partners were pretty sceptical of the mega buyout model. We had some investors telling us they preferred to invest in high-growth markets.

“Investors have figured out that investing in high-growth areas – especially in central Europe which has high GDP growth, currency appreciation and macro-economic stability – is more sustainable than overleveraged type buyouts in western Europe and the US.”

Mid Europa had a significant change to its investor base which doubled from its 2005 vintage fund with 45 to 50 investors to more than 100 for the latest fund. Some of the newcomers included Middle Eastern and Asian investors which Baudon said tended to better understand the high-growth emerging markets story compared with more traditional investors.

But nine months after the credit crunch, the future of buyout fundraising is far more shaky.

This month, French buyout house PAI Partners missed its hard cap for its biggest fund and closed several months later than intended. The fund, at €5.4bn, was double the size of its previous fund which a number of investor sources said was originally targeted at €5.8bn and had been scaled back because of a difficult fundraising environment.

According to Cecil, the challenge investors face is whether to recommit to a fund. If they don’t, they could find themselves at the bottom of the queue for a fund that has regained popularity if the market improves.

He said: “There are some quite good names which are not getting to their hard caps. But the hard caps were planned last year which are considered too high in the light of today’s market.”

There is also the issue that institutional investors’ overall allocation to private equity, which as a rule is a set percentage of assets, have in some cases become overcommitted as the value of other investments in the stock market have dropped due to market turmoil.

Cecil said some investors didn’t have the flexibility to adjust their allocations to private equity and might therefore have to scale back commitments to meet set targets.